In Legend of the Five Rings (2nd edition) this subject is spoken of twice but it's not clear:

It says that the wounds are your earth ring *2 and next to the level there's a +X
i.e:
stamina 3, willpower 3 = earth 3 so

Wounds

__ 6 +0

__ 12 +3

etc.

It seems like this means that your first 6 wound points are free and hinder you in no manner, 7 or more in wounds will raise ALL your movement/battle related TN's (spellcasting for shugenja) by 3, and by more if you get wounded more than 12. Is that correct?

That was a friendly debate at the tables I've been at/run. We wondered if you had to fill a rank to get the bonus, or merely have any tics within it. For 1st-3rd editions, we said that a character would have to fill the rank to get its penalty with an obvious launch point of +0 (although we had a one-shot where you would get a +3 to your rolls and not TNs if you had 0 wounds for peak condition).

As far as the RAW is concerned, if you start a wound rank's track you have that penalty which overwrites other penalties.
However, if you take this route I would highly recommend doing a house rule for putting the Healthy rank at [Earth x 5] and the rest at [Earth x 2] as per the 4th Edition RAW. I instantiated this in my 3e campaign when 4e just came out and it made all the difference since the players could take 20 wounds and only be at a +3 instead of a +20. In a campaign where combat is a must I highly recommend this alteration. 4e also recommends that in especially brutal campaigns you can modify the multiplier to the Earth ring per rank but I feel that rule to be too lenient as a personal call.